On July 5, the Internal Revenue Service proposed a rule change to make tax accounting easier if some money market funds abandon their $1 fixed share price, as a result of a proposal by the Securities and Exchange Commission (SEC). The SEC has proposed implementing a floating net asset value and many, including AFP, have argued that such a move would have further reaching tax and accounting implications.
This proposed guidance is intended to mitigate tax compliance burdens that may result from proposed changes in the rules that govern the prices at which certain money market fund shares are issued and redeemed. This proposal is drafted as if the SEC had already adopted final rules addressing floating net asset value in substantially the same form as the proposed rules. If those rules are not adopted in substantially the same form as they have been proposed, the revenue procedure proposed by the IRS may not be adopted or may be adopted in materially modified form.
To view the IRS proposal in its entirety, visit: http://www.irs.gov/pub/irs-drop/n-13-48.pdf